Market Focus Shifts Back to Inflation, Rates, and Oil Amid US-China Summit
The Trump-Xi summit has reduced one source of market risk as US-China trade relations remain unresolved. However, existing agreements continue to generate measurable trade flows in agriculture, with China committed to purchasing 25 million metric tons of US soybeans annually through 2028.
US Treasury yields climbed to new highs last week, driven by elevated energy costs and strong economic activity. This relationship between crude oil, inflation expectations, and bond yields remains crucial for the week ahead.
The Reserve Bank of Australia is expected to raise its cash rate from 4.35% to 4.60% on Tuesday, consistent with forecasts from Australia's four major banks. Traders should watch the RBA's guidance on future policy, as a signal that another increase remains possible could support the Australian dollar.
The US labour and inflation data due this week will determine whether markets extend expectations for another Fed rate increase. Stronger employment combined with firm inflation would support the higher-for-longer rate narrative, favoring the US dollar while keeping pressure on gold, bonds, and rate-sensitive equities.